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What Allegro Funds has planned for Slater & Gordon
In a letter to the shareholders of listed national law firm Slater & Gordon, private equity firm Allegro Funds has outlined its intentions for the BigLaw practice, should its proposed acquisition proceed.
Jerome Doraisamy
Late last week, following days of media speculation, Slater & Gordon (ASX: SGH) confirmed that its directors are unanimously supporting a takeover bid from Australian private equity firm Allegro Funds.
In its bidder’s statement, inclusive of a letter to shareholders sent earlier today (3 March) and posted to the ASX, the private equity firm, via its subsidiary Wright NomineeCo — the Allegro subsidiary that would be acquiring Slaters — wrote that there are “significant benefits and compelling reasons” for shareholders to accept the offer, as recommended by the law firm’s directors.
These arguments, Allegro listed, include that Slaters’ share price may fall if the offer lapses and that the offer “removes your exposure to the risks and uncertainties associated with a continued investment in SGH shares”.
Moreover, the letter suggested, “there may be a further reduction in liquidity if Allegro acquires a sufficiently high interest in Slater & Gordon and causes [it] to delist”.
Whether Allegro wholly owns Slaters or is a majority owner, its intentions for the national firm comprise a four-pronged strategy: capital structure, management equity, lawyer-focused culture, and a value creation plan (VCP).
Allegro intends to undertake a review of Slaters’ capital structure, which it anticipates “will involve right-sizing or rectifying the existing Super Senior Facility to reduce the currently onerous obligations” to service it.
The PE firm also wants to implement an “attract, retain, retire” model, allowing certain key lawyers to gain equity in the business and then achieve liquidity.
With regards to firm culture, Allegro wants to “support an appropriate level of investment”, which it will determine, in class actions and cases that will facilitate to the extent possible recruitment “of the best consumer lawyers in the market”.
Finally, Allegro intends to work with firm management to develop a VCP to drive profitability and invest the capital and capability contemplated by that VCP, including through Allegro’s operating partner team.
Elsewhere, Allegro has confirmed in its letter that, if it is entitled to proceed with compulsory acquisition, it will move to delist Slaters from the ASX. However, if it only partly owns the firm, it “may” move to delist.
Either way, the PE firm said that it would remove some of the existing Slaters’ board members and replace them with Allegro managing directors Adrian Loader and Johan Krynauw.
Unless extended or withdrawn, the offer to Slaters’ shareholders will close at 7.00pm AEDT on Tuesday, 4 April.
Corrs Chambers Westgarth is representing Wright NomineeCo in the takeover, with partners Adam Foreman and Chris Allen leading the transaction.
Slater & Gordon also recently released its half-yearly financial results, with the firm having posted a profit of $16.7 million amid the takeover bid.
Jerome Doraisamy
Jerome Doraisamy is the editor of Lawyers Weekly. A former lawyer, he has worked at Momentum Media as a journalist on Lawyers Weekly since February 2018, and has served as editor since March 2022. He is also the host of all five shows under The Lawyers Weekly Podcast Network, and has overseen the brand's audio medium growth from 4,000 downloads per month to over 60,000 downloads per month, making The Lawyers Weekly Show the most popular industry-specific podcast in Australia. Jerome is also the author of The Wellness Doctrines book series, an admitted solicitor in NSW, and a board director of Minds Count.
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